The country's economic slowdown is entering a new and more serious phase, exacerbating the global slump while jolting Chinese companies and workers used to years of soaring sales and salaries.
The surprising reversal adds to concerns over whether the Chinese economy - on track to surpass Germany this year as the world's third-largest and the only one in the top tier still expanding - can help support growth and stave off deeper financial pain elsewhere around the world. [china economy] Associated Press
Fervor for electronic devices is fading in China's once-dynamic market.
China's customs agency said Wednesday that November's exports fell 2.2% from a year earlier, the first decline since June 2001. That marked a major shift from a 19.2% gain in October and a nearly 26% rise in 2007.
Imports suffered an even steeper drop, down 17.9% in November from a year earlier. They had risen 15.6% in October and more than 20% last year. The import figure signals weakness in domestic consumption, bad news for companies that export to China, and also falling demand for manufacturing components - which spells trouble for China's future exports as well.
Chinese producers of low-end goods such as toys and textiles have been struggling all year. But now, sales of higher-end machinery and electronics are declining as the U.S. economy has deteriorated sharply.
China is the third-largest export market for the U.S., and has been a major buyer of commodities. But its imports of iron ore fell 7.9% in November. Crude oil imports were down 1.8% to their lowest level this year, contributing to weakening global oil demand.
"The most striking real economic fact of the past several months is not continued U.S. economic weakness, but that China's economy has slowed much more quickly than anyone had forecast," Australia's central bank Governor Glenn Stevens said this week. [On the Decline charts] Stimulus Package
China's leaders last month announced a 4 trillion yuan ($584 billion) stimulus package, and on Wednesday wrapped up an annual economic-policy conference by reaffirming their determination to support growth by any means available. But some economists think China could be entering a sustained period of falling export orders, with the U.S., European and Japanese economies all now contracting. The World Bank expects the volume of global trade to shrink in 2009 for the first time since 1982.
That poses an especially difficult transition for Chinese firms and consumers. In the coastal city of Yuyao, Ningbo Wanglong Group says that years of rapid expansion have made it one of the world's largest producers of preservatives for food and feed. But export orders have declined rapidly since September.
"We've never experienced this before. We don't know what happened," said Zhou Hong, a sales manager. He said shipments to overseas distributors have plunged by roughly 50% to 60% in recent months. The company hasn't yet laid off any of its 1,500 employees, but has had to halve production and offer clients discounts of around 50%. "So far we don't know what else we can do," Mr. Zhou said.
China's economy is slowing particularly sharply because the export decline is combining with slackening domestic demand. Housing sales have dropped and prices are declining in most major cities. New construction has dried up, which saps demand for steel, cement and copper.
Consumers are holding off on other big purchases: Car sales dropped 10.3% from a year earlier in November, the third monthly decline this year.
Many economists are forecasting China's economic growth to slow to around 7.5% next year, which is below the government's traditional 8% target and would be the lowest since 1999. Growth this year is likely to average just over 9%, ending five straight years of double-digit gains.
Economists' worst-case scenarios for China involve a quarter or two of growth around 5% next year, far from the outright contractions typically associated with a recession in the U.S. and other advanced economies. But it does looks like China is headed for what some economists call a "growth recession," a period of weak expansion and rising unemployment.
The slowdown is translating into fewer jobs, and increasing strains between workers and employers. China doesn't publish reliable data on unemployment; few economists take seriously the official jobless rate of 4%. But there have been growing numbers of layoffs and factory closures. Hundreds of thousands of migrant workers have returned to their hometowns to wait out the slowdown. Zhou Tianyong, an economist at the Central Party School, a Communist Party institute in Beijing, estimates that the actual unemployment rate this year is around 12% and could rise to 14% next year. [China Economy photo] AFP
China's economic slowdown is manifesting itself in fewer jobs, growing numbers of layoffs and factory closures, and concerns about widening social unrest.
For most of Geely Group's short history as an auto maker, its biggest challenge was figuring out ways to expand quickly enough to meet exploding demand from China's increasingly affluent middle class. Now Geely managers are negotiating an abrupt U-turn.
Zhang Xiaodong, a company spokesman, said Geely has suspended plans to start mass production of a sports car and halted development of two large sedans. Geely's sales were down 6% in October and up 1% for the first ten months of the year, after growing more than 40% in 2005 and 2006 and 7% last year. Survival Rate
Yale Zhang, a Shanghai-based auto analyst with CSM Worldwide, said China's auto makers "are used to a high-growth environment. They don't know how to survive at a single-digit growth rate."
Although the slowdown is taking the sharpest toll on low-paid manufacturing workers, it's also spreading concern among prosperous white-collar families. Well-educated urbanites have been able to hop from job to job in recent years, extracting steep raises once a year or more. Average urban incomes are up 14.7% so far in 2008, the seventh straight year of double-digit gains.
Li Hua, a 31-year-old human-resources executive with a Shanghai sports retailer, says she used to get calls from headhunters almost weekly. She changed jobs twice in the last few years. But in October, the job market started to change. Her own company canceled its recruitment plans, and a friend got laid off from a new job with little severance.
"Now what I'm thinking is to just work hard. No complaints, no asking for a raise," said Ms. Li. "We should all feel lucky we still have a job and are doing fine."
- 15246
The surprising reversal adds to concerns over whether the Chinese economy - on track to surpass Germany this year as the world's third-largest and the only one in the top tier still expanding - can help support growth and stave off deeper financial pain elsewhere around the world. [china economy] Associated Press
Fervor for electronic devices is fading in China's once-dynamic market.
China's customs agency said Wednesday that November's exports fell 2.2% from a year earlier, the first decline since June 2001. That marked a major shift from a 19.2% gain in October and a nearly 26% rise in 2007.
Imports suffered an even steeper drop, down 17.9% in November from a year earlier. They had risen 15.6% in October and more than 20% last year. The import figure signals weakness in domestic consumption, bad news for companies that export to China, and also falling demand for manufacturing components - which spells trouble for China's future exports as well.
Chinese producers of low-end goods such as toys and textiles have been struggling all year. But now, sales of higher-end machinery and electronics are declining as the U.S. economy has deteriorated sharply.
China is the third-largest export market for the U.S., and has been a major buyer of commodities. But its imports of iron ore fell 7.9% in November. Crude oil imports were down 1.8% to their lowest level this year, contributing to weakening global oil demand.
"The most striking real economic fact of the past several months is not continued U.S. economic weakness, but that China's economy has slowed much more quickly than anyone had forecast," Australia's central bank Governor Glenn Stevens said this week. [On the Decline charts] Stimulus Package
China's leaders last month announced a 4 trillion yuan ($584 billion) stimulus package, and on Wednesday wrapped up an annual economic-policy conference by reaffirming their determination to support growth by any means available. But some economists think China could be entering a sustained period of falling export orders, with the U.S., European and Japanese economies all now contracting. The World Bank expects the volume of global trade to shrink in 2009 for the first time since 1982.
That poses an especially difficult transition for Chinese firms and consumers. In the coastal city of Yuyao, Ningbo Wanglong Group says that years of rapid expansion have made it one of the world's largest producers of preservatives for food and feed. But export orders have declined rapidly since September.
"We've never experienced this before. We don't know what happened," said Zhou Hong, a sales manager. He said shipments to overseas distributors have plunged by roughly 50% to 60% in recent months. The company hasn't yet laid off any of its 1,500 employees, but has had to halve production and offer clients discounts of around 50%. "So far we don't know what else we can do," Mr. Zhou said.
China's economy is slowing particularly sharply because the export decline is combining with slackening domestic demand. Housing sales have dropped and prices are declining in most major cities. New construction has dried up, which saps demand for steel, cement and copper.
Consumers are holding off on other big purchases: Car sales dropped 10.3% from a year earlier in November, the third monthly decline this year.
Many economists are forecasting China's economic growth to slow to around 7.5% next year, which is below the government's traditional 8% target and would be the lowest since 1999. Growth this year is likely to average just over 9%, ending five straight years of double-digit gains.
Economists' worst-case scenarios for China involve a quarter or two of growth around 5% next year, far from the outright contractions typically associated with a recession in the U.S. and other advanced economies. But it does looks like China is headed for what some economists call a "growth recession," a period of weak expansion and rising unemployment.
The slowdown is translating into fewer jobs, and increasing strains between workers and employers. China doesn't publish reliable data on unemployment; few economists take seriously the official jobless rate of 4%. But there have been growing numbers of layoffs and factory closures. Hundreds of thousands of migrant workers have returned to their hometowns to wait out the slowdown. Zhou Tianyong, an economist at the Central Party School, a Communist Party institute in Beijing, estimates that the actual unemployment rate this year is around 12% and could rise to 14% next year. [China Economy photo] AFP
China's economic slowdown is manifesting itself in fewer jobs, growing numbers of layoffs and factory closures, and concerns about widening social unrest.
For most of Geely Group's short history as an auto maker, its biggest challenge was figuring out ways to expand quickly enough to meet exploding demand from China's increasingly affluent middle class. Now Geely managers are negotiating an abrupt U-turn.
Zhang Xiaodong, a company spokesman, said Geely has suspended plans to start mass production of a sports car and halted development of two large sedans. Geely's sales were down 6% in October and up 1% for the first ten months of the year, after growing more than 40% in 2005 and 2006 and 7% last year. Survival Rate
Yale Zhang, a Shanghai-based auto analyst with CSM Worldwide, said China's auto makers "are used to a high-growth environment. They don't know how to survive at a single-digit growth rate."
Although the slowdown is taking the sharpest toll on low-paid manufacturing workers, it's also spreading concern among prosperous white-collar families. Well-educated urbanites have been able to hop from job to job in recent years, extracting steep raises once a year or more. Average urban incomes are up 14.7% so far in 2008, the seventh straight year of double-digit gains.
Li Hua, a 31-year-old human-resources executive with a Shanghai sports retailer, says she used to get calls from headhunters almost weekly. She changed jobs twice in the last few years. But in October, the job market started to change. Her own company canceled its recruitment plans, and a friend got laid off from a new job with little severance.
"Now what I'm thinking is to just work hard. No complaints, no asking for a raise," said Ms. Li. "We should all feel lucky we still have a job and are doing fine."
- 15246
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